Individual Inflation Expectations in a Declining-Inflation Environment: Evidence from Survey Data

Abstract

The paper analyses individual inflation expectations in the Netherlands over the period 2008-2014. The empirical evidence is based on the DNB Household Survey, a longitudinal online panel survey representative of Dutch-speaking population. The focus is on inflation measures based on information about the general price level, the aggregate real estate price and the price of the own house. Both individual background microeconomic characteristics and macroeconomic variables are taken into account in our empirical models devoted to explain the main determinants of inflation expectations. We find that inflation expectations decrease over the years, suggesting that individuals can pick up the direction of the price change, but respondents do not report high risk of deflation. The target inflation of 2 percent seems to be well anchored in individual expectations.